First Quantum sends $5.1-billion hostile offer to Inmet shareholders

First Quantum Minerals Ltd., a producer of copper in Africa, took its $5.1 billion bid for Inmet Mining Corp. straight to shareholders as it seeks control of a project in Panama.

First Quantum’s $72-a-share offer in cash and stock is 36% more than Inmet’s closing price on Nov. 27, the day before Toronto-based Inmet said it had rejected two unsolicited proposals. The bid will expire Feb. 14 and requires acceptance by holders of 66% of Inmet shares, First Quantum said Wednesday in a statement.

“We are taking the significant step of making this proposal directly to Inmet shareholders and requesting their support,” Chief Executive Officer Philip Pascall said in the statement. “First Quantum and Inmet are very complementary in terms of their copper focus.”

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The deal, the biggest hostile bid by a mining company since BHP Billiton Ltd. withdrew a $40 billion offer for Potash Corp. of Saskatchewan Inc. in 2010, would help First Quantum diversify geographically and increase its output, President Clive Newall said on a Dec. 17 conference call. The Vancouver-based company can develop projects more cheaply than its peers and would use its expertise to cut the cost of building Inmet’s Cobre Panama project, he said.

First Quantum’s London traded shares fell 1.6% to 1,330 pence as of 9:15 a.m. local time. The offer isn’t subject to any financing conditions or approval from First Quantum shareholders, according to the statement.

‘Broadly Skeptical’

We remain broadly skeptical of the rationale for the bid and believe a major merger and acquisition now distracts from First Quantum’s already impressive standalone growth platform

“We remain broadly skeptical of the rationale for the bid and believe a major merger and acquisition now distracts from First Quantum’s already impressive standalone growth platform,” Nomura International Plc wrote in a note.

Founded in 1996 by Pascall, First Quantum operates the Kansanshi copper mine in Zambia, the Guelb Moghrein copper and gold mine in Mauritania and the Ravensthorpe nickel facility in Australia. First Quantum is the world’s 13th-largest copper producer and predicts it will become the sixth-biggest in 2016, it said last year.

Cobre Panama is the second-largest copper venture under construction, after Rio Tinto’s Oyu Tolgoi mine in Mongolia, according to a November presentation posted on Inmet’s website. The project will cost about $6.2 billion and produce an average of 266,000 metric tonnes a year of the metal, which has more than quadrupled in price in the past 10 years in New York.

Finland, Spain

Inmet also operates mines in Finland, Spain and Turkey. Leucadia National Corp. is its largest shareholder with a 16% stake and Temasek Holdings Pte Ltd., Singapore’s state investment company, has 11%, according to data compiled by Bloomberg.

First Quantum made an offer of $62.50 a share for Inmet on Oct. 28 and another at $70 on Nov. 25, before announcing Dec. 16 it would take a sweetened $72 a share bid straight to Inmet shareholders.

The cash component of the latest offer will be financed through existing cash resources, undrawn financing facilities of $1.25 billion and a $2.5 billion acquisition facility provided by Standard Chartered Bank, the company said Wednesday.

Inmet said Nov. 28 it adopted a shareholder-rights plan, or poison pill, to block an unsolicited bid.

Goldman Sachs Group Inc., Jefferies Group Inc. and RBC Capital Markets are advising First Quantum.